You're not going to get a clear answer; as it's a matter of interpretation. I'll even give you a third option: it's not reportable income, it's just a reduction in the purchase price. But, my vote for the "correct" way is line 21 of form 1040.
If you do use sch E:
-You were an active participant
-yes, 0 days personal use
-answer no to Did You Pay Anyone $600 or More for Work Related to This Property (you didn't issue a 1099 and don't want or need to issue one)
-you add the purchase expenses to your purchase price to determine the appreciable basis
-yes, you will prorate property tax & mortgage interest for the time it was rented
edited-removed comment about depreciation recapture and claiming a loss
